I'm managing director of Strategic Communications for FTI Consulting, based in Houston. Prior to joining FTI in 2012, I had a 33 year career in the oil and gas industry, working public policy issues for a number of companies including Shell, Burlington Resources, El Paso Corp., and Coastal States. I've also led numerous industry-wide efforts to address regulatory and legislative issues at the local, state and federal level. From April 2010 through June 2012, David served as the Texas State Lead for America’s Natural Gas Alliance. I attended Texas A&I University and The University of Texas, earning B.A. in accounting.

The Rise Of Saudi TexKota

I am fascinated by this report by Dr. Mark Perry of the American Enterprise Institute, and not solely because he quotes from a piece that appeared in this space last year (see Item #4). That piece deals with my belief that, although virtually all the attention related to America’s ongoing Shale Revolution from people outside of the oil and gas industry focuses on the technology of Hydraulic Fracturing (or “Fracking”), horizontal drilling is the true technological marvel that has enabled the industry to unlock the massive stores of oil and natural gas from shale rock over the last 15 years.

It is a truly amazing feat of engineering and science that enables drillers today to bore a hole 2, 3 or even more miles vertically below the surface, then literally bend heavy steel pipe to drill another mile or more horizontally through very dense underground rock, and ultimately hit a target no bigger than a quarter. Although the image of this industry that one typically sees portrayed on television or in the rare movie that deals with the subject matter is of wild, crude, hard-drinking, oil-covered roughnecks carelessly tossing around equipment at a filthy drilling sight, the truth about today’s drilling operations is that they are scrupulously clean, incredibly safety-conscious, and deploy a higher level of modern technology than almost any other industry on the face of the earth. It really is too bad the public seldom gets to witness that reality.

But back to Dr. Perry’s piece, and more specifically, item #3 in it, in which he posts the following:

The combined oil output from America’s “Big Three” super-giant shale oil fields (Bakken, Eagle Ford, Permian) surpassed Canada’s crude oil production last September for the first time ever, and has exceeded Canada’s output in each of the last seven months through March of 2014 (most recent month for international oil production statistics from the EIA). As a separate oil-producing nation, those three oil fields in March, with a combined production 3.83 million bpd, would have been the fifth largest crude oil producer in the world, behind only Russia (10M bpd), Saudi Arabia (9.7M bpd), US (8M bpd) and China (4.1M bpd).

That, friends, is an amazing development, one made possible by the industry’s technological prowess, and one that has come about very recently. Indeed, if you look at Item #2 in Dr. Perry’s piece, you find that as recently as the beginning of 2011, these three fields combined were producing just about 1.5 million barrels per day. At that time, those fields produced less than 25% of overall U.S. oil production; today, they produce almost 46% of the nation’s daily oil output. And if one adds in the remainder of Texas’s oil production to this total, you find that these two states combined produce about half of all the oil produced in the U.S. today.

So why is that, you might ask? The first, most obvious answer is that is where the resource is. It is a quirk of geologic fate that the great preponderance of these gigantic oil reservoirs happened to be formed beneath the respective surfaces of only two states. I say “preponderance” because the Permian extends into New Mexico, the Eagle Ford into Mexico, and the Bakken into Montana and Canada, but obviously the big volumes are coming from Texas and North Dakota.

Another answer to why these two states have produced such prodigious volumes of oil in recent years is less obvious but no less important: Public policy. It should be pretty obvious to any observer that, had the Eagle Ford happened to lie beneath the surface of New York, California or any number of other U.S. states, it would certainly not today be the biggest-producing oil field in North America. Frankly, if it were beneath New York, it may not have yet produced a single barrel of oil, given the manner in which the current Governor has stonewalled development of the state’s rich natural gas resources.

Or what if these massive oil reservoirs lay beneath federal lands in the Inter-Mountain West? In Texas and North Dakota, operators are able to get drilling permits issued by state regulators in a handful of days. Seldom does the process take more than a month. Yet on federal lands, this process can consume many months or even years, as federal regulators pile an ever-increasing number of stipulations, studies, mitigations and planning requirements on operators.

Many reports have been written in recent years about the fact that the shale revolution has taken place mainly in states that have little federal interference or land ownership. While this is partly an accident of geography and geology, it is not entirely so.

The rise of Saudi TexKota is no accident. It has happened because these two states are governed in ways that promote economic development and growth, and both are home to sophisticated regulatory structures that allow for such rapid growth to take place in something resembling an orderly fashion.

For the United States, this has been the single most important strategic energy development of the 21st century, whether the current Administration and its supporters in the anti-development community wish to admit it or not. The advent of Saudi TexKota has helped cut U.S. oil imports in half, and given our leaders geopolitical advantages the country hasn’t enjoyed for half a century.

All of which helps to explain why the anti-development forces have begun to focus so much of their attention on Texas and North Dakota in recent months. They clearly see where the Golden Goose is laying its proverbial eggs and feel it is their job to kill it. Any clear thinking person should fervently hope they fail in this endeavor.

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